Intel’s German offices raided in EC antitrust investigation

The European Commission has turned up the volume in its investigation of Intel’s conduct, with retailers in Germany and Great Britain now confirming they’ve been raided — the same retailers mentioned in AMD’s civil suit against Intel.

Since AMD launched its civil antitrust suit against Intel in June 2005, the matter of whether Intel’s private business dealings with Media Markt, Germany’s largest technology retailer, has been a subject of debate. Now Media Markt along with UK tech retailer Dixon Services Group (DSG) International report their headquarters have been targeted by unannounced raids from the European Commission’s antitrust regulators, on the same day as Intel acknowledged its corporate offices in Munich received similar visits.

DSG International operates stores in Britain under the Currys, Dixons, and PC World brands.

This morning, the EC Commission on Competition would only confirm that it had carried out raids at “the premises of a manufacturer of Central Processing Units (CPUs) and a number of personal computer (PC) retailers,” according to a Commission statement. Spokesperson Jonathan Todd declined further comment for legal reasons, in response to a request from BetaNews this morning.

Intel has been preparing to defend itself at a hearing scheduled for March 11 in Brussels, in connection with an investigation launched last July in which the Commission charged Intel with “abuse of dominant power.” In that investigation, the EC accused Intel of giving illegal rebates to retailers in exchange for purchasing Intel CPUs exclusively; of giving some retailers preferential prices below Intel’s own costs; and in one instance, of paying off a retailer in exchange for an exclusivity agreement. Intel has repeatedly denied these allegations, and continues to do so.

BetaNews asked Intel corporate spokesperson Chuck Mulloy to characterize the nature of the raids on Intel’s Munich offices: specifically, was it the kind of “raid” one sees in the movies, complete with “G-men” and knocking down doors?

“Raid is a term of art that I’ve come to accept,” Mulloy told us. “A more accurate description is that it was an unscheduled visit by investigators from the EC and German antitrust investigators. Per our normal practice we are cooperating with the investigators.”

Mulloy could not comment on the subject of the raid, again for legal reasons.

Many Americans first became familiar with the names of leading European technology retailers through AMD’s 2005 civil suit. There, Intel’s chief competitor specifically alleged it was entering into exclusivity deals with Media Markt parent company Saturn Holdings, DSG, and others — deals that AMD said shut it out of key consumer outlets.

“AMD has been entirely shut out from Media Markt, Europe’s largest computer retailer,” reads the 2005 suit, “which accounts for 35% of Germany’s retail sales. Intel provides Media Markt between $15-20 million of [market development funds] annually, and since 1997 Media Markt has carried Intel computers exclusively.”

Market development funds (MDF) are the typical fees that retailers expect to be compensated by their suppliers, in exchange for such things as premium shelf space, cooperative advertising promotions, and the occasional deep discounts. These are typically perfectly legal.

Later, the AMD suit mentions DSG: “In the United Kingdom, Intel has locked up substantially all of the business of DSG (Dixon Services Group), operator of three major chains including Dixon and PC World that collectively account for two thirds of the U.K. PC market. In exchange for Intel payments, DSG has agreed to keep AMD’s share of its business below 10%. Like Media Markt, DSG reports that Intel penalizes it with reduced MDF just on account of the small amount of business it does with AMD.”

The suit also mentioned German mega-retailer Aldi (which also operates a grocery chain in the US), the British division of Toys ‘R’ Us, and the UK tech retailer Time, though there is no information to indicate that any of those chains have received visits from the EC.